Major U.S. equity indexes were narrowly mixed in the first quarter of 2016. Sharp gains in the second half of the period erased deep losses during the first several weeks of the year. A combination of key factors, including plunging oil prices and global economic growth concerns, caused world markets to lurch lower early in the year. By mid-February, several non-U.S. markets had moved into or deeper into bear market territory, commonly defined as a decline of at least 20% from recent highs. Equities rallied sharply through March as the Bank of China and the European Central Bank unveiled new stimulus that pushed certain interest rates into or deeper into negative territory. In addition, the U.S. dollar weakened versus other currencies amid pared expectations for U.S. interest rate increases this year.
The Growth & Income Fund returned −0.14% in the quarter compared with 1.35% for the S&P 500 Index and 0.82% for the Lipper Large-Cap Core Funds Index. For the 12 months ended March 31, 2016, the fund returned 2.73% versus 1.78% for the S&P 500 Index and −0.68% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 2.73%, 11.24%, and 7.02% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.67% as of its fiscal year ended December 31, 2015.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Growth & Income Fund underperformed the S&P 500 Index due to stock selection and sector allocation decisions. Stock selection in information technology drove underperformance. Both stock selection and our overweight allocation in financials, one of the weakest-performing sectors in the index, detracted from relative results. Utilities contributed positively to the portfolio's performance. Stock selection within the consumer discretionary sector was another positive contributor of value add. The portfolio's sector exposures are the result of individual stock decisions and generally do not represent a broad macro-view of the sectors. Because of the concentrated nature of the portfolio, we want to select high-quality, well-managed, fundamentally sound firms that have great products and services.
While cyclical stocks received a boost during the back half of the quarter, we believe there are still challenges ahead for these economically sensitive segments of the market. As a result, we are maintaining our cautious outlook as U.S. investors remain wary of normalizing U.S. monetary policy, oversupplied commodities, and potential geopolitical risks from the upcoming presidential election. We expect to see a continuation of subdued market returns coupled with volatility. We believe muted corporate earnings growth will face the headwinds of weak organic growth, low oil prices, and a strong U.S. dollar.